The Basics of Life Insurance
There are two main kinds of life insurance and they are suited for different purposes. Temporary life insurance provides coverage for those years while raising a family and needing to protect family income. Permanent life insurance can be both an investment and a way to pass assets on to heirs or pay final taxes.
Term Life Insurance is life insurance that has a set premium for a specific number of years and then renews at a higher amount after that. It can usually only be renewed up to age 85. For example a Term 10 policy is usually very inexpensive for the first ten years, then it renews at a higher premium for the next ten. Eventually, it becomes more expensive than a permanent policy taken out at the same time. That’s why a term insurance policy is best for temporary coverage.
Whole Life Insurance is a permanent kind of insurance with a cash value that grows over time as more money is invested into the policy and the insurance company makes a return on the investment. The policy can be paid for over 10 years, 20 years, or a set premium every year for life. In retirement, the cash value can be leveraged with a line of credit, providing some tax-free income. At death, the insurance company first repays any outstanding loans on the policy and then pays the remaining death benefit to the named beneficiaries. Whole life is a great way to make some tax-free investment returns as well as provide a benefit to heirs on death.
Universal Life Insurance is a flexible kind of permanent insurance. It works best for a person who has a set amount they want received at death and they aren’t looking for substantial growth in the death benefit. It has the flexibility to be minimally funded or funded with more than the minimum premium and invested tax-free to help pay for future premiums. It can in many circumstances be less expensive than a whole life policy.
If you are interested in life insurance, I can help you pick out what would most suit your needs. I also have access to the major insurers in Canada and can provide you a quote with the lowest cost out of those insurers.